Analyst Forecast Fuels Amazon

INTERNET

December 17, 1998|Bloomberg News

Amazon.com shares surged 19 percent on Wednesday, or almost $50, after a CIBC Oppenheimer analyst predicted that the No. 1 online bookseller's stock will reach $400 in 12 months after already soaring more than eightfold this year.

Amazon.com rocketed $46.25 to $289, giving the unprofitable company a market value of $15.2 billion. Rival Books-A-Million jumped $8.06 to $18.13 and was the most active U.S. stock. Amazon.com was the third-most active.

Seattle-based Amazon.com's market value now matches that of Caterpillar, the largest maker of construction equipment. Amazon.com reported third-quarter revenue of $153.7 million, compared with Caterpillar's third-quarter revenue of $5.17 billion.

By contrast, Barnes & Noble, the largest U.S. bookseller, has a current market value of $2.2 billion. It reported $674.1 million in revenue for the fiscal third quarter ended Oct. 31 and a quarterly loss of $4.59 million, for which the company blamed higher expenses for its Internet site.

Amazon.com shares have skyrocketed this year on investor enthusiasm for almost any company with a Web site. Amazon.com has at least quadrupled its revenue every quarter this year, though hasn't yet turned a profit in the highly competitive business of peddling books, CDs and videocassettes over the Internet.

"The insanity goes on and on," said David Simons, managing director of New York-based Digital Video Investments, an institutional research company. CIBC Oppenheimer analyst Henry Blodget, who made the $400-a-share forecast, wasn't available to comment.

Amazon.com would not offer revenue projections or to say when it expects to be profitable.

The company's losses are expected to widen to $1.71 a share next year from $1.62 this year, according to analysts' estimates. One analyst expects the company to make a profit in 2001, according to First Call.

One shareholder said the $400 price range was attainable, though aggressive. "This is the high end" of possibilities, said Ryan Jacob, portfolio manager of the Internet Fund, which owns Amazon.com shares. "This is not a certainty."

Not all investors and speculators are optimistic about the stock.

About 7.4 million Amazon.com shares were sold short as of Dec. 1, or one-third of the total "float," or shares held by the public. Short sellers seek to profit from a declining stock by selling borrowed shares and then buying them back later at what they hope will be a lower price and pocketing the difference. If the stock rises, though, short sellers lose money.

Blodget said he was raising his price target because Amazon.com passed his $150 target last month. Amazon.com recently expanded its product line to include videos and gifts such as personal electronics.

"We firmly believe that Amazon.com will one day make a lot of money, and we find it hard to believe that if our aggressive-growth scenario stays on track over the next 12 months, the stock's upward trend will reverse itself," Blodget wrote.